On Monday, industry experts at the SaaScon conference in San Francisco estimated that the software as a service (SaaS) market would grow an average of 20 percent per year until at least 2010.

"This is an industry that is going to grow and change," said Bill McNee, founder and chief executive officer for Saugatuck Technology in a keynote address. "On the one hand, that is a $20-25 billion market. But on a relative scale, our large enterprise software vendors are not going to go away and are not intimidated with this stuff."

SaaS is a model of delivery for software applications that allows maintenance, support, and operation over an off-site network. Speakers continuously referred to Salesforce.com as the quintessential example of a successful SaaS company.

"Salesforce.com has been the poster child for this industry because internal IT doesn't want to have to deal with those crazy sales guys, do they?" McNee said. "So this is a great application and we'll see a lot more integration to micro markets."

If SaaS is to become the dominant software model, as speakers at the conference predict it will, now could be a pivotal time in the software industry. McNee's research showed that 55 percent of small to medium companies currently have at least one SaaS application running. Benefits of using SaaS programs include the elimination of hardware, remote support of the product, and interoperability with other business applications.

Typically, barriers to SaaS adoption have revolved around security. Human resources applications are good uses of SaaS but corporations don't want their highly-sensitive data to be transmitted over any network but their own.

"Data and security are still very much on the question list but the answers are pretty routine," said Tod Loofbourrow, president and chief executive officer of Authoria, Inc. "People have come a long way in understanding that they're already dealing with data that is outside the four walls of the company. Now they're much more concerned about integrity and speed."

As SaaS gains popularity, experts also warned about companies that will piggyback its reputation.

"We are seeing companies coming up that are fake SaaS," said Ann Winblad, a partner of Hummer Winblad who has funded several SaaS companies in recent years. "It has to be a true multi-tenant application. It has to offer access privileges, management, etc. It also has to be built on Web services so that it can integrate with other people's products and be an open product."

Traditionally, software developers have tried to write programs around anticipated customer needs. With SaaS, that model no longer applies. Customers get to decide what they want from their software, how they want it, and just how much they will pay for it. It is customizable and so is the pricing structure.

"Years ago if you wanted to know what was next, the easiest place to go to was large corporations and go into their research labs, or IBM's research labs," said keynote speaker Tim Chou, author of "The End Of Software." "I contend that in software, that's no longer true. The pattern was to look inside the large corporations and figure out what would happen down at the consumer. In software, I would contend that we will see the reverse. It will start at the consumer and go upwards."

SaaScon runs through Tuesday at the San Francisco Marriott. Further information can be found at www.saascon.com.

Editor's Note:A previous version of this story erroneously cited the number of small and medium businesses that have a SaaS running, as cited by Bill McNee.